PepsiCo close to acquiring probiotic drink maker KeVita for under $500 million

The acquisition will help expand PepsiCo foothold in the beverage industry. KeVita’s products include sparkling probiotics, master brew kombucha tea, and vinegar tonics.

According to sources familiar with the matter at hand, PepsiCo Inc. is closing to acquiring KeVita Inc., a U.S. drinks company, in what is the U.S. beverage giant’s latest push to diversify its soft drinks business.

If the deal were to go through, it would mark the first outright acquisition of PepsiCo through Naked Emerging Brands, its venture capital arm, whose mission is to expand the company’s portfolio of drinks that appeal to health-conscious consumers.

The sources have further discosed that PepsiCo already has a minority stake in KeVita and has a distribution agreement with Oxnard, a California-based company.

According to the sources, the deal could see the light of day by the end of this month, if all goes well. The deal has valued KeVita, a privately held company, at less than $500 million.

The sources have preferred the safety of anonymity since the negotiations are still on-going and are thus confidential.

When asked to respond to requests for comments, a spokesperson for Pepsi declined saying the company does not comment on “rumor or speculation.”

KeVita could not be immediately reached for immediate comment.

Of late, the market for sugary carbonated beverages has contracted since consumers prefer calorie-free alternatives. Many U.S. cities have introduced or are seeking to introduce a ‘soda tax’ on sugary drinks.

KeVita was founded in 2010 by Chakra Earthsong and Bill Moses. While Earthsong is a nutritional consultant Moses is an entrepreneur. The company has also received investments from private equity firms including SPK Capital LLC and KarpReilly LLC.

Since only a small percentage of beverage companies manage to take off, early minority investments in such companies make sense since it allows bigger companies to familiarize themselves with the startup before their outright purchase.

Typically, these initial investments are in the nature of distribution agreements which allow the startups to find a footing and prove their business plans.

Case in point: Bai Brands LLC, a relatively new startup which specializes in producing an antioxidant beverage in which the Dr. Pepper Snapple Group Inc. has a minority stake, is already exploring an outright sale in the hope that it gets valued at more than $2 billion.